Tax Law Special Report Federal Individual Income Tax Filing Season Runs From January 23 Through April 18, 2017

The IRS announced in its first news release of the year that it will begin accepting 2016 individual income tax returns via electronic filing, and will start processing paper returns, on January 23, 2017. The same announcement says that the deadline for filing 2016 returns is April 18, 2017.

Nathan B. Hannah, attorney

Yes, the filing deadline is April 18, not April 15, again this year, as the result of two events: (1) April 15 is on a Saturday, and (2) Emancipation Day, a holiday that is observed in only a few states and, more importantly for this purpose, in the District of Columbia, will be observed this year on Monday, April 17. That pushes tax day all the way back to April 18, 2017. That means you get three whole days extra to file your return.

For you early birds, the IRS announcement also says that if you are e-filing, you can submit your return to your e-filer before e-filing begins on January 23. The e-filer will just hold it and submit it to the IRS when e-filing begins.

The IRS news release proclaims that “[c]hoosing e-file and direct deposit for refunds remains the fastest and safest way to file an accurate income tax return and receive a refund.” That may be true, but the advent of e-filing and direct deposit for refunds, coupled with the expansion of refundable tax credits (credits that qualify the filer for a refund even if the filer doesn’t owe any tax) has created a veritable cottage industry of filing tax returns using stolen identities to obtain fraudulent refunds.

In an effort to combat this enormous and ongoing problem, which the IRS has dubbed “identity theft tax refund fraud,” the IRS says it is continuing to work with state tax officials, tax preparation software vendors, and tax preparation firms to find ways to stop identity theft in tax return filing. This initiative, which the IRS calls the Security Summit, is credited with making “significant inroads” against fraudulent returns in 2016. That’s good, but the problem is so huge, they still have a long way to go.

The IRS news release announcing the dates for filing 2016 returns is IR-2017-01. If you read it on the IRS website at irs.gov, you will see a link to additional information about the Security Summit initiative.

Tax returns filed with stolen identities apparently remain a much larger problem than frivolous returns filed with the intent to evade paying income tax, but you still shouldn’t believe anyone who says they have figured out a scheme for you to legally avoid paying income tax. The IRS has published, and periodically updates, a guide that describes the most commonly used schemes by which people claim they don’t have to pay income tax (or file a tax return). The guide is titled “The Truth About Frivolous Tax Arguments” and is posted on the IRS website (irs.gov) in the “tax professionals” section, under “news and resources.”

Most of the schemes described in that guide are, if you think about it for a few minutes, founded on premises that are pretty obviously false. A couple of the schemes, however, are relatively more plausible (I say relatively more plausible because a bit of background information is necessary to expose their false premises, as compared with the obviously bogus schemes):

“[A] trust provides a way of legally and permanently ‘untaxing’ oneself so that a person is no longer required to file federal income tax returns and pay federal income taxes.” If a taxpayer places assets in a trust but retains control of the assets, or retains the ability to direct the use or enjoyment of the assets, the taxpayer is treated as the owner of the assets for federal tax purposes and is liable for the tax on the income from those assets. And even if an individual does set up a trust that he or she doesn’t own for federal tax purposes, that doesn’t mean that the income produced by the trust isn’t taxed. It just means that the trust itself, rather than the individual, has to file a tax return and pay the tax.

“The filing of a tax return is voluntary.” Simply put, when it comes to filing a tax return, “voluntary” does not mean “optional.” Filing a tax return is not optional for those who meet the minimum gross income requirements. The description of the U. S. tax system as “voluntary,” used in many court decisions and IRS publications, “refers to our system of allowing taxpayers initially to determine the correct amount of tax and complete the appropriate returns, rather than have the government determine tax for them from the outset” (which apparently is how it is done in some other countries). The “voluntary” nature of the tax system simply means that you, the taxpayer, determine the correct amount of tax and complete the appropriate return, rather than have the government do this for you. The fact that the system involves self-reporting does not make the filing of a tax return (or the payment of tax) optional.

The guide also spells out in some detail the penalties for not filing a return, or not paying income tax, in reliance on one of these frivolous arguments. If you are in doubt about whether the government is serious about this, check with Wesley Snipes.

Nathan B. Hannah is a Shareholder in the Tucson office, and practices in the areas of estate planning and administration, real estate, and commercial transactions. He is also a noted blogger, and you can find more of his articles on his private blog,

Contact Attorney Hannah: nhannah@dmyl.com or 520/ 322-5000

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